ISLAMABAD: Five energy projects of the China-Pakistan Economic Corridor (CPEC), worth around $7 billion, are at risk of being axed owing to slow pace of their development.
The water and power ministry has directed sponsors of these projects to complete them by the December 2018 deadline or face ejection from the multibillion-dollar project, say documents and officials of ministries of planning and development and water and power.
One project relates to mining coal in Thar while the remaining are power plants which are listed to generate 4,620 megawatts of power. Four of these projects fall under the ‘priority’ schemes category and have to be completed by December 2018 as per the understanding with Chinese authorities.
If the government finally decides to drop these schemes from CPEC, Sindh’s share in the mega project will fall from $11.3 billion to roughly $6.7 billion. Balochistan’s share in CPEC projects will fall to around $7 billion.
Among the projects facing the axe are four Sindh-based schemes, including the Engro surface mine in Block–II of Thar Coal with a capacity of 3.8 million metric tonnes per annum, the 1,320MW Engro Thar coal-fired power plant, the 1,320MW Sino-Sindh Resource Limited Power Plant in Thar Coal Block-I, and the 1,320MW Thar Mine Mouth Oracle coal-fired power plant.
The Balochistan-based project includes the 660MW HUBCO coal-fired coastal power plant.
The warnings is a means for the government to pressure sponsors into adhering to the agreed timelines for these schemes, explained Ahsan Iqbal, the minister for planning and development, while talking to The Express Tribune.
Iqbal, however, stated that these projects are at various stages of implementation adding that he hopes that Engro’s 1,320MW project will be completed by December 2018 while the HUBCO project will be commissioned by 2019.
The commissioning date of 3.8mt mining at Thar Block-II project is set for June 2019 but the water and power ministry has asked Sindh Engro Coal Mining Company to bring it forward to December 2018 or “it will be at risk of deletion from the CPEC”. Similarly, the 1,320MW Engro Thar power plant is expected to be commissioned by June 2019 but the water and power ministry wants it to become operational by December 2018.
The water and power ministry has asked sponsors of the 1,320MW Sino-Sindh Power Plant, which has run into operational issues, to start construction of the project or face demotion from the list of priority schemes to the list of actively promoted CPEC projects or even deletion from the corridor altogether.
The Hubco project, which was earlier promoted to a priority status, is again at risk of demotion to the second phase of the CPEC, which are set for completion by 2022. The project’s sponsors are currently negotiating with financial institutions on loan term sheets but the ministry has asked them to start construction work from equity to meet the December 2018 commissioning date.
Sponsors of the 1,320MW Oracle power plants, which is on the list of actively promoted projects, has yet to sort out issues with equity arrangement, determination of coal tariffs, risk coverage guarantee structure and term sheets. The ministry has directed them to resolve all issues as soon as possible to avoid deletion from CPEC.
The CPEC projects are entitled to special treatment such as reduced taxes while power generation schemes are protected from the adverse impacts of circular debt.
Published in The Express Tribune, July 20th, 2016.